Foreign Reference Pricing

This position paper of the Global Medical Technology Network is an internal statement of principles intended to offer participating associations a guideline for consistent non-binding, voluntary application at a national or regional level. As circumstances differ in each market, national associations should choose whether to use the GMTN principles as an appropriate reflection of local conditions. GMTN position papers only apply to the countries in which the subject policies, systems, or practices are in place.

Foreign Reference Pricing

The medical technology industry supports reimbursement systems that serve the needs of patients through open and fair competition between innovative firms and that reflect local market conditions.

In reimbursement systems in which government-established reimbursement levels are used for medical technologies, it is important to reflect these local factors in medical technology price levels.

The use of Foreign Reference Pricing (FRP) to establish national payment levels for medical technologies can create challenges for patient access to medical technologies globally and for the development and introduction of technologies by innovator firms.

• In many countries, the markets for healthcare products are entirely or substantially dominated by government purchasing and/or reimbursement - so reference pricing can distort the true value of the product.

• All types of products - not just medical technologies - exhibit a range of price variation at the retail level, both within and between countries for the same product.

• Price variation between countries occurs because of:
  • Historical price levels.
  • Currency exchange rates changes.
  • Differences in retail margins.
  • Differences in regulatory and product liability systems.
  • Different costs of distribution, sales, and overhead.
  • Different healthcare structures and purchasing methods.
  • Differences in product lines and types by country.
  • Differences in the mix of competing products and treatment options available in each market.

• Under artificial pricing controls like FRP, local price differences for a product are eliminated and lower-priced markets receive discounted prices because higher-priced markets contribute to the cost of research and development. Ultimately, FRP systems distort investment decisions by medical technology innovators, and reduce funds needed to discover next generation life-enhancing products. FRP systems can also drive the decision on whether or not to introduce a new product in a particular market.

• The GMTN invites governments to adopt market-based approaches reflecting the existing conditions in each nation, to reimburse medical technologies, and to support innovation and ensure patient access to the most innovative therapies.